Aer Lingus: Another fine mess we’re in?
Initially, I was proved wrong, because the share price did rise after the launch. This reflected the fact that the airline was sold cheaply in the first place, but the attempt by Ryanair to take over and the response of the pilots, among others, also boosted demand for the shares. The share price has subsequently fallen back, and many investors, including Ryanair and the pilots, are now nursing considerable losses. For Ryanair, there is the comfort of knowing it holds a big stake in its main competitor, but for the pilots it is more difficult to see a bright side. The only consolation they can take at the moment is that investing in equity markets is a long-term game and patience can sometimes be necessary.
However, current developments within the company would not inspire much confidence. SIPTU is currently threatening to take industrial action or even walk out of social partnership because of the pay freeze imposed on staff by the airline until a €20 million cost-cutting plan is implemented. At the same time pilots are being suspended because of their refusal to cooperate with the hiring of staff to operate the controversial Belfast to Heathrow slot. I
t is not hard to see where SIPTU is coming from. Rightly or wrongly it believes the airline is reneging on social partnership commitments. At the end of the day I find it hard to believe SIPTU would walk out of the social partnership arrangement, as it would miss the perks involved. The folly of the partnership process is being highlighted once again: it is a one-way process that works well when the unions get what they want, but when they don’t they start to throw the toys out of the pram.
I find it more difficult to understand the logic to what the pilots are up to vis-a-vis the Belfast staff. It is reported that 400 people have applied for the positions of first officer and aircraft captain. These applicants must be aware of the terms and conditions on offer, but have expressed a willingness to accept them. Why then should the other Aer Lingus pilots have a problem with this?
The whole sorry mess in Aer Lingus is further compounded by the appointment of two government representatives to the board of the airline. One wonders what their role will be. The Government has refused to use its clout to protect the interests of the mid-west region, despite the strong logic of doing so. It will be interesting to see how these directors will behave. The logical step would be for the State to offload its shareholding if it is not prepared to use it in the best interests of the country.
From an investor’s perspective, it is not at all obvious why one would invest in a company carrying so much baggage, particularly relative to its main competitor, Ryanair. Every attempt to put the airline on a stronger commercial footing is being met with huge resistance and it is hard to see this changing. It appears that for every battle Dermot Mannion wins, a bigger one will await. The big question that shareholders should ask themselves is if they want to own an airline that is subject to the conflicting objectives of management, staff, unions and the Government.
Meanwhile, the forgotten element, the paying customer, is being ignored as the various interest groups fight their petty battles. It is all pretty depressing and one wonders if the threat of industrial action at Aer Lingus will ever dissipate for the airline’s customers.
* Jim Power is chief economist with Friends First
